Portfolio Rebalancing May Not Pay Off This Year

By

Jonathan Clements

Jun 4, 2015 11:39 am ET

Every year, we are reminded to rebalance our stock portfolios. This year, maybe we shouldn’t.

After five lackluster years, foreign stocks are finally showing signs of life. MSCI’s EAFE (Europe, Australasia and Far East) index of developed markets jumped 9.7% in 2015 through Wednesday and its emerging-markets index was up 4.9%, outpacing the S&P 500’s 3.6% gain.

If we are seeing the long-awaited revival of foreign stocks, this rally has only just begun—and rushing to rebalance, by lightening up on foreign stocks, could hurt your returns.

Don’t get me wrong: I am a big fan of rebalancing. The idea is to set target percentages for your portfolio’s various investments.